Folks, the big banks are in trouble and I think this might be the most important video that I have ever posted on. YouTube The system is starting to collapse in front of our eyes and even the FED is starting to admit it in this video. We are going to break down exactly what you need to know and I promise if you watch to the very end you are going to be very very happy you did because I'm going to give you an entirely New Perspective on this financial sector and really the banking system that we have and the threats that it is facing right now. And this video is brought to you by our flash 40 coupon code on our ZIP Trader you program link down below.

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We hope to! Never Let You Down Okay so I want to go ahead and start from the get-go with this concept that a lot of people don't understand about the foundation of our financial system, the fractional Reserve banking system. So let's say that you go and you deposit one hundred thousand dollars in the bank. When you check your statements or you open up the bank app on your phone, it shows that you have a balance of a hundred thousand dollars with that bank. But then what does the bank do with your money that you just deposited? While Most people think the bank goes, they take that hundred thousand dollars, They take a small reserve of that, and then they go and lend it out to other people for purchases of homes or whatever.

Most people also think that reserve requirements are very, very high so as to prevent Bank collapses or Bank runs and people not being able to withdraw money, right? Well, neither of these things are completely true. In fact, the FED sets reserve requirements and on March 15, 2020, the FED board reduced reserve requirement ratios to zero percent zero percent and that has been effective since March 26, 2020.. this action completely eliminated reserve requirements for all depository institutions. Prior to this regulations in the U.S forced banks with over 122 million in assets, which is pretty much any sizable Bank to hold at least 10 percent of their deposits in their reserves.

So what actually happens now in the post-pandemic world is Banks Just choose whatever rate they feel is adequate for reserves and then they Shore it up If they think things are getting a little sketchy like they're doing right now at the last minute and net and in effect, you just kind of have to hope that the banks know what they're doing. But let's just say that banks are all operating as responsible entities and they're choosing to operate on a self-imposed 10 percent reserve requirement to ensure that they are well fortified. Well, what happens then? How does the banking system work? then? Well, once your 100 000 goes into the bank, they go and they put 10 000 of that in their reserves and then they go and lend out the remaining ninety thousand Jill Schmoe comes to the bank and says, hey, I want a ninety thousand dollar loan? The bank goes and lends Joe Schmo The Ninety thousand Joe Schmo puts it in his own bank account at. Let's just say another institution, that bank now has ninety thousand dollars and Joe Schmoe has a ninety thousand dollar balance in his savings account.

So what does the bank do with that ninety thousand dollars that they're now storing for Joe Schmoe. Well, they take 10 as well as a reserve and then they prepare the remainder for Lending themselves. Then Jill Smith comes along and just for Simplicity. Let's just say that she happens to want exactly eighty one thousand dollars.

The bank loans her the 81 000 and then she goes and puts it in her own bank account at you guessed it, another institution who then lends it out again. Now, where am I going with this? Well, let's just look at how much the money supply has already expanded. The original deposit of a hundred thousand dollars in your bank account has now also resulted in ninety thousand in Joe Schmo's bank account and 81 000 in Jill's bank account. Technically, your one hundred thousand dollar deposit has now expanded the money supply to a total of two hundred Seventy One thousand dollars.

The banks owe a total of two hundred seventy one thousand dollars in deposits to deposites, all originating from that one hundred thousand dollar original deposit. Now, let's make this a little bit more complicated and a little bit more realistic. Let's say that the bank that Jill deposited money into goes and takes the eighty one thousand dollars and saves the ten percent reserves and uses the remaining 172 900 dollars to lend out. But the bank lends it out via credit cards to 10 different people who just separately spent seventy two hundred ninety dollars each.

Well, now they've each gone and borrowed seventy two hundred ninety bucks and they've gone and spent it at a bunch of different businesses who then do what with the money. Well, they go and they store it in their own accounts. They use some of that to pay employees to buy materials, pay all expenses, and so on, and so forth. And that money goes and gets deposited in the accounts of the people that they are making those payments to and so on and so forth.

Those people go and buy things and those people go and buy things and those people go and buy things and the bank goes and ones out their money and their money. and their money. Who then more people go and use the buy things and put in their accounts and so on and so forth. so you could see just that starting point where you're giving the bank a hundred thousand dollars.

How far that goes down the road? In terms of increasing the total money supply in the economy, it's a situation where dollars just keep expanding and expanding until one thing breaks and all of a sudden everything must come cascading in like dominoes. And obviously the lower the interest rates and they'll lower the reserve requirements, the more this phenomenon is allowed to happen. So if the FED wants to stop it from happening and start restricting it and slow down the economy, they can go and do the reverse of this, which is what they're doing. But in doing so, the FED recognizes the system that is in place and how sensitive it is because while they are raising rates while they are quantitative tightening, while they are trying to drain liquidity from the overall Financial system, they also have to understand that if they go too far and too aggressively while the entire House of Cards could just collapse very, very easily.

So let's just suppose for a second that just one of these institutions sees some sort of problem where people are trying to withdraw too much. Capital Some loan segments are defaulting at too high of a rate and the bank needs to all of a sudden eat up their reserves. Well, the bank now owes a lot of money to people and businesses who store their cash at that bank, but the bank doesn't have the money to give them. Which means that basically the entire chain of the financial system is now screwed.

So in order to reduce the risk of this happening when banks no longer have reserves, well, there's the institution of the Federal Reserve. The bank would then go and if it meets the requirements, the FED could go and provide some excess liquidity to that bank to get it through the bank run. So what happens when banks in the U.S can't go and pay out their depositors? They don't have the immediate liquidity. Well, they go up and call the Federal Reserve pop, a Powell answers and they say Daddy Powell We need liquidity as fast as possible.

We need it Now we need to pay out people. This is a huge threat to the entire Financial system and Papa Powell says okay, turning the money printers on and they provide that excess liquidity. And the U.S Central Bank does this, not just in the U.S but really around the world, which we'll talk a little bit more about later because that's happening at an unprecedented rate. Now, if a U.S Bank is so destabilized that it can't be provided liquidity from the FED because there's no hopes of it paying it back, well, then the bank has to go to the taxpayers.

First, they hit the FDIC and the vastly underfunded fractional Reserve FDIC program goes and looks at how to bail them out, or you have to go down some other avenues where the taxpayer cuts the check. But from the person' perspective of the government and from the Central Bank, you don't want any of the financial system members to get anywhere close to needing you for that excess liquidity and definitely not needing you for a bailout because at that point, the House of Cards is only about an action or two, a misplaced action or two from completely tumbling. Because even though this sounds like a very, very crazy system and is very, very delicate. while the original one hundred thousand dollar deposit itself was just one hundred thousand pieces of fugazi paper, and nowadays fugazi digits that don't have any inherent value outside of the Full Faith and Credit of the US government.

So in a system where you are printing fugazi pieces of paper and that fugazi piece of paper is being re-borrowed millions of time and circulated throughout the economy like all of a sudden. hey, wait, maybe we need to make sure this House of Cards stays up because it's going to be very, very difficult to deal with the ramifications if it doesn't. So the point is, if you understand this fractional Reserve banking system, you understand exactly that. the FED can only do so much so fast when it comes down to this policy trajectory they are on.

And if you listen to them very, very carefully, you can see that anxiety over the collapse of this entire system is starting to grow. and what are some new threats that we're seeing right now? Well, let's start with the Treasury Market Watch Just reported quote for months Traders Academics and other analysts have read it that the 23.7 trillion dollar Treasury market might be the source of the next financial crisis. Then last week U.S Secretary Janet Yellen acknowledged concerns about a potential breakdown in the trading of government debt and expressed worry about a loss of adequate liquidity, a loss of adequate liquidity in the market. Hmm.

Now strategists at B of A Securities have identified a list of reasons why U.S Government bonds are exposed to the risk of large-scale forced selling or an external surprise at a time when the bond market is in need of reliable groups of big buyers. What about the confidence to pay public debt in the first place? Well, Peter Schiff Who yes is an eternal Bearer and big gold guy and has been for decades. He raised a good point on Twitter Today, he said, when the national debt hits 35 trillion next year at a six percent interest rate, annual interest payments on the national debt would exceed National Defense Welfare and education spending combined at eight percent interest would exceed Social Security National Defense and education combined. So here you're looking at this and you've got to be thinking two things: Either we go and we print tons more money to be able to deal with this massive deficit that we're going to have.

or we go back and we lower rates again. And to be fair, when rates rise, it's not like all government debt now has to pay the higher interest rate immediately. No, a lot of it is locked in 10, 20, or 30-year fixed payments. But the point is, the more restrictive you go and for longer, the worse the debt repayment situation is.

And the higher interest rates climb, the farther you go, the worse of the situation it is. And the closer you get to something like this, which he's talking about. And of course, one of the more troubling areas that the FED is acting very very quickly to try to solve is in the International liquidity. Market The FED seems very, very worried about the international U.S Led Financial system.

In fact, the Swiss National Bank this week Drew more than 11 billion dollars from the U.S Federal Reserves Currency Swap Line facility. Another sharp rise from the week earlier amount New York Fed data released on Thursday showed the Swiss National Bank had drawn nearly 6.3 billion the week before and 3.1 billion the week before That look at how fast this is exploding and a lot of people say oh, this is all Credit Suisse but I think it's a lot of other Banks as well. Yes, and B The Swiss National Bank referred to its auction results showing 17 parties had participated in its dollar auction this week and declined for their comment. This means what a lot of Swiss banks And really? European Banks If you look at everything including the European Central Bank and what they're going through right now, while a lot of them are needing access to emergency reserves of liquidity denominated in USD, they simply don't have enough.

So they are rushing to the U.S Central Bank and the U.S Central Bank hoping to prevent a global collapse is providing them liquidity as fast as they possibly can. This is happening to a degree all over the world right now and it is just starting. And because of these measures, the FED is starting to get a lot of accusations that they're actually doing some contradictory measures Providing liquidity is a form of quantitative easing. Is it not? You're providing money into the system and listen to what some Fed members are saying.

This is Feds Mary Daly from San Francisco Unusual whales reported this morning that she said quote interventions to stabilize a dislocated Market is very different from quantitative easing. Interesting. Interesting. So the FED is trying to intervene into dislocated, destabilized markets by injecting liquidity.

And that is supposed to be different than quantitative easing is it though, is that different when the Fed's goal right now is to take away as much liquidity of USD as possible? Is it not contradictory to then go and re-inject liquidity in certain areas? Does that not represent certain areas where the FED is already starting to push back on its own policy because they're fearing the overall Financial system may be maybe in dire risk of collapse if they don't Does this symbolize that a broader Fed pivot may very well be close by? So what are some triggers that the Federal Reserve responds to when considering whether or not they need to provide more quantitative easing or more injections of liquidity or a overall Fed pivot? Well, luckily, they post these vulnerabilities for everybody to see. I'm going to read over the list that they have on their website very quickly and I want you to ask yourself as I'm reading over this if you see any of these as high risk areas in The Current financial system and the current economy on both a national level or on a global level. Number One, the first vulnerability they say is elevated valuation pressures as signaled by asset prices that are high relative to economic fundamentals or historical. Norms This is a vulnerability in the sense that it implies a greater possibility of outsized drops in asset prices that destabilizes the whole system all at once.

Number two: Excessive borrowing by businesses and households, which leaves them to distress if their incomes decline or the assets they own fall in value, ask yourself: Are businesses or households at risk of seeing assets they hold decline in value or their income decline within the next 12 months? Is that a risk? Number three: Excessive leverage within the financial system? Is there excessive leverage right now? even with rates going up? Well, this is a chart of the millions of dollars in margin: Accounts at Brokers and dealers. Is this too high compared to where we were pre-pandemic Obviously, a lot of people are like, well, it's come down a little bit, but is it more or less risky than it was just in 2019 or 2018.? Ask yourself that question. And finally, number four: Elevated Funding risks. Elevated funding risks can occur when financial institutions raise funds from the public with a commitment to return investor money on short notice.

But those institutions then invest much of the funds and illiquid assets that are hard to sell quickly or in assets that have a long maturity? Ask yourself right now: are you starting to see crucial debt markets freeze up and provide very, very little liquidity on both a individual institution basis or on a governmental basis Or on a global basis? Are you seeing any evidence of a liquidity in bond markets? So the question that I have for you in conclusion, is: are the risks that I just mentioned? Are they already at elevated levels? Are they already showing outsized when comparing to previous decades outsized risk and more importantly, are they going to get worse into 2023? If yes, then that means the FED has two options as we go into Q1 and Q2 of 2023.. the first option is fight inflation and risk the entire House of Cards collapsing in a very tragic, insane, fireworky type of way or number Two pivot and just let the currency inflate at extreme rates for as long as necessary. Based on reports that I'm seeing, it seems like somewhere in the middle of those two I think that you have enough hawkish members at the FED that are going to be willing to push this farther. But but I also think the FED is going to settle on a inflationary Target rate that is well above two percent.

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